With a booming economy like India, everyone is on the lookout for the next big investment opportunity to benefit from the growing sectors. The FDI numbers speak for the demand from all over the world. So, as an Indian residing overseas, it’s only right that you make the best of the appreciating investment avenues. The rules for making investments in India vary for Non-Resident Indians (NRI). This includes the need for a demat account. Learn all about it in this detailed blog.
What is an NRI demat account?
A demat account for NRIs dematerialises securities holdings and makes managing them easy in a digital form. Once you attain the status of an NRI, you can no longer trade with your Indian demat account. You will need to open either an NRE demat account or an NRO demat account with a bank like IDFC FIRST Bank. The former allows you to make investments directly with your foreign income. With the latter, you can use your Indian income to invest in mutual funds.
Benefits of opening a demat account as an NRI
With a NRI demat account, you can easily manage your securities in one place. Here are some other advantages:
· Consolidated management
All your securities like shares, ETFs, mutual fund units, government bonds, etc., get managed in a single place with an NRI dematerialisation account. This makes it easier to track your portfolio.
· Protected investments
Securities held in an electronic form are stored with authorised depositories. Hence, the risks associated with physical share certificates, like loss, theft, and damage are resolved.
· Automated actions
Dividend releases, bonus units, interest payouts, stock splits, and other advancements on your investments are automatically managed.
· Better compliance
You get a clear digital record of your holdings and investment transactions through a demat account. This helps you meet FEMA guidelines and RBI’s tax reporting rules.
Can NRIs invest in mutual funds without a demat account?
While a demat account is mandatory for investments, NRI or not, you can invest without it in the following instances:
· Direct mutual funds
You can invest without a demat account as an NRI if you engage in direct trading through Asset Management Companies, Registrar and Transfer Agents, or authorised platforms.
· Statement of Account format
If you choose to hold your securities in a Statement of Account format or physical certificates, you don’t need a demat account to invest in mutual funds. This is, however, a rare occurrence since the introduction of demat accounts in India.
How to open a demat account as an NRI?
NRI Account Opening Process:
Demat account for Non-Resident individual can be opened Face to face or Non face to face through Offline Demat account opening form and can be opened by individual and/or joint holders who hold existing Bank account with IDFC FIRST Bank account.
Checklist for account opening:
· UCIC of all account holders.
· Signature as per CBS of all account holders.
· Exclusion for accounts: Re KYC due, Account in any freeze status, Account in Dormant status
· TAT for account opening- T+1 working day
Documents required for NRI Demat account opening (All the KYC to be self-attested by the customer)
· Pan Card
· PIS permission (in case of NRE account which shall be linked to broker for trading) (not required for standalone Demat Account example for AIF credit in Demat)
· Passport
· Recent Photo
· Indian Address proof (Any one from the below list)
· Overseas Address proof (Any one from the below list)Nominee Details
Proof of Address (POA): – List of documents admissible as Proof of Address:
(*Documents having an expiry date should be valid on the date of submission.)
1. Passport/ Voters Identity Card/ Ration Card/ Registered Lease or Sale Agreement of Residence/ Driving License/ Flat Maintenance bill/ Insurance Copy.
2. Utility bills like Telephone Bill (only land line), Electricity bill or Gas bill – Not more than 2 months old.
3. Bank Account Statement/Passbook — Not more than 2 months old.
Final words
Direct mutual fund investments may not require a demat account. But as a general rule, an NRI dematerialisation account is mandatory for investing in the Indian stock market. It provides a safe digitised space for your stocks, ETFs, mutual funds, and other securities. SEBI mandates the use of a demat and trading account for stock investments. So, if you want to continue your investments in India, you must open a demat account along with updating your bank accounts.
Disclaimer: This article is published in association with IDFC First and not created by TNM Editorial.